Despite a new California law designed to protect consumers from hidden costs, restaurants statewide will still be allowed to charge service fees after Gov. Gavin Newsom signed a new bill into law.
The new law, officially known as the Consumers Legal Remedies Act, allows restaurants, bars, food concessions, grocery stores, and grocery delivery services to continue charging service fees, healthcare costs, and other surcharges as long as the charges are clearly listed for customers to see.
Businesses under this exemption will have until July 1, 2025, to implement any necessary menu changes.
Before Newsom signed the Consumers Legal Remedies Act, restaurants had to comply with the so-called “junk fee” law.
“SB 478 applies to restaurants, just like it applies to businesses across California,” a Department of Justice spokesperson told the San Francisco Chronicle in May. “The law is about making sure consumers know what they are going to pay and requires that the posted price include the full amount that a consumer must pay for that good or service.”
Since Monday, SB 478 prohibits businesses from charging “junk fees” or burying added costs to artificially lower prices, a practice commonly seen across various industries.
Prior to the exemption, food industry leaders worried that SB 478 would significantly impact the California restaurant industry, resulting in price hikes for consumers and pay cuts for employees.
They disagreed with the original interpretation of the law.
“This legislation was promoted as a measure that would clarify, but not expand, the scope of current law,” President Jot Condie told the publication. “Unfortunately, the Attorney General appears to have broader ambitions for this law than the legislators that wrote and passed it.”
The new laws come after California’s fast-food law took effect in April. Under the new law, the minimum wage for fast-food workers increased from $16 per hour to $20, prompting fast-food companies to raise prices to keep up with labor costs.
